Rush for BES as end nears: Neasa MacErlean notes a degree of panic as some schemes sell out within hours of opening

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The Independent Online
SOME of the new business expansion schemes are selling out within hours of opening their subscription lists as investors rush to take advantage of the last spring BES season.

Richard Ellis's Flexit closed its books within two hours earlier this month. It found itself oversubscribed by pounds 15m on an issue that had already raised pounds 50m.

Some degree of panic appears to be emerging in the BES investment market, which will come to its pre-ordained close at the end of December.

The Best BES Advice newsletter describes would-be Flexit investors descending on the registrars by 'literally running to their door in Fenchurch Street clutching their cheque books and prospectuses'.

Some BES sponsors are seeing demand whipped up on the back of rumours that the Government may curtail BES investment from Budget day on 16 March.

Many BES schemes involve the repurchase of repossessed homes - a move that may contribute to the recovery of the property market. However, there are suggestions that if the rates of return on these schemes become too high the Government might consider suddenly limiting their availability.

But fear is a good marketing tool, and one player in the market said: 'I don't think they'll stop it. BES schemes are stopping in December 1993 anyway.'

Despite the oversubscription of some BES schemes in the past couple of weeks, the schemes that are likely to prove most popular are expected to emerge over the next few weeks.

These are guaranteed by a bank and have typically in the past offered a 'loan back' after six months of between 71p and 75p for each pounds 1 gross invested.

When the loan back is added to the 40p tax relief that higher rate taxpayers claim from the Inland Revenue, investors see a return of - in this example - an annualised return of up to 34 per cent within six months.

Anthony Yadgaroff, of the BES investment advisers Allenbridge Group, said: 'Every major sponsor is currently working on a six-month scheme.' There is one such scheme out next week.

Some of these schemes could be heavily over-subscribed. Investors can take advantage of the six-month loan back and then reinvest the proceeds in a full five- year scheme in the autumn, just before the BES regime closes.

The difficulty for many would- be investors will probably be hearing about the new issues quickly enough to get their application forms accepted.

BES investment advisers, such as Allenbridge Group and BESt Investment, are obviously more than happy to advise current and existing clients about the availability of issues.

Johnson Fry, one of the main sponsors which also acts as a broker, will mail the prospectuses it recommends free of charge.

The most unusual scheme so far is the Peppa - 'the first-ever combined PEP and BES' - launched by Abtrust Fund Managers and Neill Clerk, the Scottish solicitors. Peppa opened last Wednesday, and managers were still trying to drum up business at the end of this week. Perhaps the hybrid scheme - 20 per cent personal equity plan, 80 per cent assured tenancy BES - has proved too complex for the investor to feel comfortable.

Allenbridge Group 071 409 1111; BESt Investment 071 936 2037; Johnson Fry 071 321 0220.

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